The Importance of Managing a Client's Collection

Summary

With the new tax law in place, planning for intangible personal property, especially charitable planning will become increasingly important. With no deduction for state taxes, sellers in high tax states will see long term capital gains tax rates dramatically increased. Understanding planning for collectibles will be a unique niche for the wise advisor.

Published on Jan 2018

By: Laurence C. Zale, Founder - Laurence C. Zale Associates, Inc.

Executive Summary

This article will briefly explore the elements of collecting from the perspective of a wealth management advisor and their collecting clients: its joy, triumph and rarified bliss to its less attractive attributes of envy, frustration, and despair.

Why do people collect? The reasons are various and often irrational. Yet one in three Americans collects something. Collectors and inheritors (their overlooked counterparts) are driven by curiosity and passion to financial gain and tax relief. While many feel deep emotional involvements with their collections or inheritance, others blithely view them as disposable assets akin to stocks, bonds and real estate.

Art & Wealth Management Services

Wealth advisors are motivated to increase their clients’ liquid assets and manage them. But the illiquid varieties such as fine art, collectibles, luxury collectibles, antiques, jewelry, gems, and other tangible personal property are rarely discussed. Why? Primarily because these assets are not easily bought, sold or gifted. Neither are they usually part of a wealth advisor’s training and experience.

These challenges can be narrowed if wealth advisors ask clients relevant question about their collections when planning their financial affairs. Advisors will learn about the phenomenon of collecting and the need to collaborate with experts. They will also gain insight from clients willing to discuss their objects of desire, often revealing themselves in a manner they would not do with other assets.

By not asking these questions, wealth advisors will miss an opportunity to holistically serve their clients and potentially manage these hidden assets, with a wealth allocation of $ 1.62 trillion in 2016, according to the Deloitte/Art Tactic Art & Finance Report 2017. The wealth allocation is estimated to increase to $ 2.7 trillion by 2026.

Questions

Here is a list of questions for wealth advisors to ask their clients—from the inspiration to collect, to inquiring if an independent expert is needed to manage, sell or donate a work or a collection, to initiating an estate planning program:

What do you collect or own? Please identify all that apply.

When did your interest in collecting begin and what was your inspiration?

Describe your first acquisition.

Are you drawn to a particular object or artist?

Do you have a favorite work?

What is your biggest regret?

Has your vision of collecting remained the same? If not, how has it changed?

Do you share your collection with other collectors or the public?

Do you offer advice to existing or new collectors?

Are you a member of any collecting clubs, societies or affinity groups?

What percentage of your total assets is devoted to art, collectibles, luxury collectibles, jewelry & gems, antiques and other tangible personal property?

Has your collection been recently appraised?

Is your collection insured?

Are any of your objects in storage?

Have you considered the implication of the Tax Reform Bill 2017 for your collection?

Do you require experts in the field of collecting to provide independent solutions to your lifetime and legacy objectives?

On whom do you rely for independent advice for your collection?

The Takeaway

Art & wealth management services are increasingly being offered by wealth advisors to their clients who collect. Prompted by continued art and collectibles market growth and higher valuations, wealth advisors are collaborating with independent art advisors, collection mangers and other experts to provide a holistic wealth management plan of action. The Deloitte/ Art Tactic Art & Finance Report 2017 also found 78% of wealth advisors offer art and collectible collection services. Innovative technology and social media will increase the percentage.

Laurence Zale has been an art collector, and has successfully managed the art collections of individuals, families, corporations and charities, for over twenty years. He is president of Laurence C. Zale Associates, an independent New York visual arts advisory firm for collectors, public charitable organizations, private foundations and corporations. His company’s services include strategic planning that result in the acquisition, ownership or disposition of works of art and other tangible personal property. Laurence is a member of the American Alliance of Museums, the Association of Healthcare Philanthropy and the American friends of The Courtauld Institute of Art. After completing his undergraduate work at Washington University in St. Louis, Laurence earned postgraduate degrees from New York University, and The Courtauld Institute of Art, University of London. A frequent speaker and writer on connoisseurship, philanthropy and estate planning, Laurence has taught at the Sotheby’s Art Business program. In addition to being a visual arts advisor, he was a vice-chairman of the board at the Brookdale University Hospital and Medical Center, Brooklyn, New York from 1994 to 2013.

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